MACROECONOMIC PRICE AND QUANTITY - RESPONSES WITH HETEROGENEOUS PRODUCT MARKETS

How do heterogeneous types of product market competition affect the ma croeconomic properties of the economy? We consider an economy with thr ee different types of product market: oligopolistic, competitive. and fix-price. We examine the effect of an increase in the money supply, a nd how it is split between changes in price and quantity. The theme of the paper is that there is a whole range of possible macroeconomic be haviour from a Keynesian pure output response to a Classical pure-pric e response. What matters is: (a) the relative sizes of sectors, and (b ) the nature of preferences and technology.